Cutting Losses: Cuba Downsizes Its Sugar Industry

The May 2002 announcement that Cuba would dramatically downsize its sugar industry made definitive a change that had been coming for years, and was forced by international
market conditions. With sugar prices falling steadily, and having lost the Soviet bloc subsidies that for decades made sugar exports artificially lucrative, Cuba faced a choice: to attempt to revive the industry with subsidies and large investments, or to cut its losses and try to restructure it to make it profitable.

Cuba chose the latter course, to the immediate benefit of the national balance sheet. But a large set of challenges remains: completing the closure of half the nation’s sugar mills and the conversion of massive amounts of land from sugar to other uses; caring for the people involved; raising productivity in the downsized sugar sector; and producing derivatives that will pull profits from cane and its waste products.

Sugar has an indelible place in Cuba’s history and culture, but as an economic proposition it has lost its starring role. The downsized sector is no longer a proxy for the health of the Cuban economy. More time must pass before the sugar industry’s retooling can be fully assessed, but even as the plan gets under way one can examine the plan’s design, how it is proceeding, how Cubans view it, how it affects them, and the long-term
implications.